Pearson v. Cannon

1 WO 2 NOT FOR PUBLICATION [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Susan Pearson, No. CV-16-02721-PHX-DJH 10 Plaintiff, ORDER 11 v. 12 Sean Cannon, et al., 13 Defendants. [14] 15 Pending before the Court is Plaintiff’s Motion for Award of Attorneys’ Fees and 16 Costs, filed in association with a garnishment that was initiated to collect on the 2017 17 judgment in this matter (Doc. 59). Defendants Sean Cannon and Cannon Law Firm, PLLC 18 (collectively “Cannon”) filed a Response (Doc. 61), as did non-party Cambridge Estates 19 Homeowners Association (“Cambridge Estates”) (Doc. 60). Plaintiff, Susan Pearson, filed 20 a Consolidated Reply to the Responses of Cannon and Cambridge Estates (Doc. 62). 21 I. Background 22 Plaintiff brought this action against Cannon in August 2016, alleging violations of 23 the Fair Debt Collections Practices Act. (Doc. 1). On March 2, 2017, the Parties filed a 24 Stipulation for Entry of Judgment in Plaintiff’s favor in the amount of $1,025.00. (Doc. 25 26). This Court approved the Stipulation and entered judgment in favor of Plaintiff and 26 against Defendants for $1,025.00, plus interest at the rate of .66% per annum from the date 27 of the Judgment until paid in full. (Doc. 27). Plaintiff subsequently filed a Motion for 28 Award of Attorneys Fees (Doc. 28), which this Court granted in the amount of $13,335.00 1 (Doc. 33). The Clerk of Court then entered judgment in favor of Plaintiff and against 2 Defendants for the $13,335.00 in attorneys’ fees. (Doc. 34). The Clerk also entered a 3 Judgment on Taxation of Costs for $1,516.12. (Doc. 32). On June 28, 2017, Plaintiff filed 4 a Notice of Satisfaction of Stipulated Judgment, stating that the $1025.00 stipulated 5 judgment had been satisfied, but that the Judgments for Attorneys’ Fees and Costs had not 6 yet been satisfied. (Doc. 35). 7 On May 2, 2019, Plaintiff applied for a writ of garnishment for monies in the 8 possession of garnishee, Maricopa County Sheriff’s Office (the “County”), that were being 9 “held on behalf of” Cannon. (Doc. 36). The Application for Writ of Garnishment stated 10 that the judgment for taxation of costs, plus the attorneys’ fees judgment, totaled 11 $14,851.12 and that the total amount of the outstanding judgments, including interest, was 12 $15,145.04 (Doc. 36). The Application for Writ of Garnishment also stated that Plaintiff 13 had “good reason to believe, and therefore alleges,” that the County had in its possession 14 non-exempt monies and/or personal property belonging to Cannon. (Doc. 36 at 2). A Writ 15 of Garnishment was issued to the County, again identifying a total amount owed of 16 $15,145.04. (Doc. 38). 17 In the County’s Answer to the Writ of Garnishment, the County stated that it 18 “received $16,287.89 on May 16, 2019 for judgments arising out of Maricopa County 19 Superior Court cause number CV2018-007526.” (Doc. 39 at 2). The Answer further stated 20 that “$12,707.33 of this amount is owing to the Judgment Debtor, Sean Cannon” and that 21 “$2,920.00 is withheld from [Cannon] for attorney’s fees that [Cannon] alleged occurred 22 but have not been awarded by the Superior Court.” (Doc. 39 at 2). The County stated that 23 it would hold the funds pending an order from the Federal Court. (Doc. 39 at 2). 24 On May 16, 2019, Cannon filed an Objection to Garnishment, Request to Quash 25 Garnishment, and Request for Hearing. (Doc. 40). In this Objection, Cannon stated that 26 the funds being held by the County did not belong to Cannon, but instead belonged to 27 Cannon’s legal client, Cambridge Estates. (Doc. 40 at 1-2). Cannon further stated that the 28 funds were in the possession of the County as a result of a foreclosure judgment in 1 Maricopa County Superior Court case number CV2018-007526, Cambridge Estates 2 Homeowners Association v. Dung Ta. (Doc. 40 at 2). Cannon attached a copy of the 3 judgment in that case, which shows that the named plaintiff was Cambridge Estates and 4 that Cannon was the attorney for Cambridge Estates. (Doc. 40-1). Non-party Cambridge 5 Estates, still represented by Cannon, similarly filed a Motion to Quash Garnishment and 6 Request for Hearing. (Doc. 42). That Motion to Quash Garnishment also objected to the 7 garnishment on the basis that the “money being held belongs to Cambridge, not its 8 attorney.” (Doc. 42 at 2). 9 In Plaintiff’s May 23, 2019, Response to the Motions to Quash, Plaintiff stated that 10 she “filed a Writ of Garnishment seeking $2,920 that is not part of any state court judgment 11 and that belongs to [Cannon].” (Doc. 45 at 1). Plaintiff also stated that there was an 12 existing state court judgment that awarded $12,707.33 to Cambridge Estates and that the 13 “Writ of Garnishment does not seek those funds.” (Doc. 45 at 2). Plaintiff’s Response 14 then details alleged flaws in the $2,920.00 of additional costs in the Maricopa County 15 Superior Court case between Cambridge Estates and Dung Ta. Specifically, Plaintiff 16 alleged that the $2,920.00 in costs was obtained in violation of state and federal law and in 17 violation of court order. (Doc. 45 at 3-5). Plaintiff further alleged that the $2,920.00 was 18 “part of a pattern of Cannon procuring or seeking personal funds disguised as amounts due 19 to clients.” (Doc. 45 at 5). Plaintiff next asserted that “[Cannon] is using the Writ in the 20 Ta case to collect what he believes he is entitled to above and beyond the fees awarded in 21 the Judgment in the Ta case. As the $2,920 is earmarked to go to Cannon, it is clearly 22 subject to garnishment.” (Doc. 45 at 8). Plaintiff then acknowledged that an evidentiary 23 hearing “may be appropriate” and stated that discovery regarding the accounting of both 24 Cannon and Cambridge Estates is necessary. (Doc. 45 at 8).1 [25] 1 Plaintiff’s extensive familiarity with the Maricopa County Superior Court case between 26 Cambridge Estates and Dung Ta apparently arises from the fact that Plaintiff’s counsel also represents Dung Ta in that matter. (Doc. 45-1 at 24). Indeed, in Plaintiff’s Response to 27 the Objection to the Garnishment, Plaintiff states that “[g]iven the experience that Plaintiff’s firm has had in which Cannon has withheld critical and material documents 28 against the mandates of Arizona Statute and the Arizona Rules of Civil Procedure, Plaintiff requests that this Court schedule the evidentiary hearing sixty days from the date of the 1 The Objection to Garnishment was referred to Magistrate Judge John Boyle (Doc. 2 44), who scheduled a garnishment hearing for June 11, 2019 (Doc. 46). At the June 11, 3 2019, hearing, an evidentiary hearing was scheduled for August 19, 2019. (Doc. 50). The 4 Court also stated that Plaintiff “may serve limited discovery on [Cannon]” prior to the 5 evidentiary hearing. (Doc. 50 at 2). 6 On June 29, 2019, Cannon and Cambridge Estates withdrew their Objections and 7 Motions to Quash Garnishment “as to the $2,920.00 at issue in the garnishment action.” 8 (Doc. 57 at 1). Cannon and Cambridge Estates also requested that the evidentiary hearing 9 be cancelled and that all post-judgment discovery actions relating to Cambridge Estates be 10 quashed because Cambridge Estates “has no connection to the above matter in any way 11 whatsoever.” (Doc. 57 at 2). This Court granted the Motion to Withdraw, vacated the 12 August hearing, and ordered that all post-judgment discovery shall cease. (Doc. 58). On 13 or around July 3, 2019, the County released the $2,920 to Plaintiff and released the 14 remainder of the garnished $16,287.89 to Cannon in trust for Cambridge Estates. (Doc. 15 59-4 at 57-58). 16 On July 16, 2019, Plaintiff filed the Motion for Award of Attorneys’ Fees and Costs, 17 seeking $13,860.00 in fees and $549.80 in costs. (Doc. 59; Doc. 59-1 at 4). 18 II. Analysis 19 Plaintiff asserts that she is entitled to fees for this garnishment based upon this 20 Court’s inherent authority to sanction actions taken in bad faith; based upon 28 U.S.C. § 21 1927, which provides that an attorney can be required to personally satisfy excess costs 22 caused by the attorney “unreasonably and vexatiously” multiplying the proceedings; and 23 based upon A.R.S. § 12-1580(E), which provides for an award of fees when an objection 24 to garnishment is made “solely for the purpose of delay or to harass the judgment creditor.” 25 (Doc. 59 at 1, 4). In support of this position, Plaintiff asserts that “[b]ecause of the actions 26 of Cambridge Estates and Cannon, Plaintiff was required to compile and file lengthy 27 court conference to build in the inevitable discovery conferences that will arise in this matter.” (Doc. 45 at 9 (emphasis added)). Plaintiff then states that Plaintiff can have all 28 written discovery ready to present to the management company of Cambridge Estates within three business days of the Court’s conference. (Id.). 1 responses with detailed exhibits demonstrating their fraudulent accounting, prepare for a 2 potential evidentiary hearing, and draft and submit discovery demands and subpoenas all 3 to get information that Defendants have been hiding in two other proceedings in efforts to 4 mask that the sought funds by [Plaintiff] masked as debts to Cambridge Estates.” (Doc. 59 5 at 2). Plaintiff also alleges that, because it only sought $2,920 in the garnishment and 6 because Cannon and Cambridge Estates eventually withdrew their objections to the 7 garnishment of that amount, the initial objections were made in bad faith or solely for the 8 purpose of delay or harassment. (Doc. 59, Doc. 62). 9 In response, Cannon and Cambridge Estates both assert that the original amount 10 stated in the Writ of Garnishment was $15,145.04, which is far greater than the $2,920.00 11 to which Cannon and Cambridge Estates ultimately withdrew their objection. (Doc. 60 at 12 2, Doc. 61 at 2-3). Cannon and Cambridge Estates also argue that they did not act in bad 13 faith or solely to delay or harass because the garnishment was issued against money that 14 belonged to Cambridge Estates, a non-party client of Cannon’s; they explain that, because 15 the money did not belong to Cannon (the Defendant and Judgment Debtor), but instead 16 belonged to Cambridge Estates (whose only connection to this matter is that it is 17 represented by Cannon), it would not be proper to garnish the money. (Doc. 60, 61). 18 Cannon and Cambridge Estates also state that they withdrew their objections to the 19 garnishment of the $2,920.00 once it became clear at the hearing before Judge Boyle that 20 Plaintiff was only seeking to garnish $2,920.00, not the original $15,145.04 stated in the 21 Writ of Garnishment. (Id.). 22 Under Rule 69 of the Federal Rules of Civil Procedure, when there is a money 23 judgment, “[t]he procedure on execution—and in proceedings supplementary to and in aid 24 of judgment or execution—must accord with the procedure of the state where the court is 25 located.” Fed. R. Civ. P. 69(a)(1). Arizona Revised Statute § 12-1570 et seq. addresses 26 garnishment procedure in Arizona. Section 12-1580, regarding objections to garnishment, 27 identifies the limited circumstances under which a party may recover costs and attorneys’ 28 fees in a garnishment proceeding: 1 The prevailing party may be awarded costs and attorney fees in a reasonable amount determined by the court. The award shall not be assessed against nor 2 is it chargeable to the judgment debtor, unless the judgment debtor is found to have objected to the writ solely for the purpose of delay or to harass the 3 judgment creditor. [4] Ariz. Rev. Stat. Ann. § 12-1580 (E) (emphasis added). This statute is the “exclusive avenue 5 for recovering fees in a garnishment proceeding.” Ironwood Commons Community 6 Homeowners Assoc., Inc. v. Randall, 439 P.3d 1193, 1198 (Ariz. Ct. App. 2019); Blum v. 7 Cowan, 330 P.2d 961, 966 (Ariz. Ct. App. 2014) (stating that the statute provides for the 8 exclusive means to obtain attorneys’ fees for garnishments). Therefore, based on this 9 statute, Plaintiff may only recover costs and fees for the garnishment if Defendant objected 10 to the writ solely for the purpose of delay or to harass the judgment creditor. 11 Here, Plaintiff presents a myriad of allegations regarding Cannon’s relationship with 12 his client, Cambridge Estates, as well as Cannon’s alleged efforts to hide the terms of their 13 fee agreement. (Doc. 62 at 4). Plaintiff’s allegations, however, are insufficient to establish 14 that Cannon and Cambridge Estates objected to the garnishment “solely” to delay or to 15 harass Plaintiff. There does not seem to be a dispute that, of the more than $15,000 that 16 was garnished, only $2,920 was properly subject to the garnishment. The Application for 17 Writ of Garnishment and Affidavit in Support of Application for Writ of Garnishment only 18 mentioned the $14,851.12 owed. (Doc. 35, Doc. 37). The Application for Writ of 19 Garnishment also broadly stated that the County “is holding non-exempt monies on behalf 20 of [Cannon]” and that the “amount of the outstanding judgments [including interest]. . . is 21 $15,145.04.” (Doc. 36 at 2). Based on the Writ of Garnishment and the fact that the 22 garnished amount included a substantial amount of money that ultimately belonged to 23 Cambridge Estates, not to Defendant/Judgment Debtor Cannon, the objections filed by 24 Cannon and Cambridge Estates were not made “solely for the purpose of delay or to harass 25 the judgment creditor.” See Ariz. Rev. Stat. § 12-1580 (E). 26 Plaintiff argues that it is nonetheless entitled to fees because it clarified that it was 27 only seeking the $2,920.00 as early as its Response to the Objections that it filed on May 28 23, 2019 (Doc. 62 at 6 (citing Doc. 45 at 2)). Therefore, according to Plaintiff, because 1 Cannon and Cambridge Estates did not withdraw their objections as to the $2,920.00 until 2 June 29, 2019, Cannon and Cambridge Estates demonstrated an intent to delay, as well as 3 bad faith. (Doc. 62 at 6-7). Arizona Revised Statute § 12-1580(E) is silent regarding the 4 timing of any obligation to withdraw objections regarding a portion of garnished funds. 5 Rather, § 12-1580(E) simply authorizes a fee award if a party objects to the garnishment 6 solely for purposes of delay or harassment. As discussed above, because the amount 7 garnished included a substantial amount that belonged to Cambridge Estates, not to the 8 judgment debtor Cannon, the Court cannot conclude that the objection was improper or 9 was solely for purposes of delay or harassment.2 10 Plaintiff further argues that the heightened “solely for the purpose of delay or to 11 harass” standard in § 12-1580(E) does not apply to Cambridge Estates because the statute 12 only refers to the judgment debtor’s objection and Cambridge Estates is a third party, not 13 the judgment debtor. (Doc. 62 at 9-10). Therefore, Plaintiff argues, the Court need not 14 find an intent to delay or harass before it awards fees against Cambridge. The Court 15 declines to do so; Cambridge Estates is not the judgment debtor and rightfully objected to 16 a garnishment of its funds. 17 The Court also declines to award fees based upon its authority to sanction bad faith 18 actions or its authority to award fees based on counsel unreasonably and vexatiously 19 multiplying the proceedings. First, Arizona case law states that, within the context of a 20 garnishment proceeding, § 12-1580(E) is the “exclusive avenue” for recovering fees. 21 Ironwood Commons, 439 P.3d at 1198 . Second, assuming that this statute does not impact 22 the Court’s authority to award fees based upon bad faith or unreasonable and vexatious [23] 24 2 Consistent with this, Arizona statute provides that, if a bank account being held in more than one name is garnished, there needs to be a “determination of the interest of the 25 judgment debtor” to that account. Ariz. Rev. Stat. § 12-1595 (C). Following this determination and upon entry of an order, the garnishee shall release all impounded funds, 26 except those belonging to the judgment debtor. Ariz. Rev. Stat. § 12-1595 (D). Although the present case does not involve a joint bank account, but instead involves a judgment 27 primarily owed to the Defendant/Judgment Debtor’s client, the situation is analogous because the garnished funds did not belong solely to the judgment debtor. Therefore, the 28 first step in the proceeding would necessarily be to determine which funds were subject to garnishment; this further indicates that the initial objection was appropriate. 1 conduct, the initial amount garnished far exceeded the $2,920.00 that could be attributed 2 to Cannon, thus necessitating some degree of response. Third, Cannon and Cambridge 3 Estates withdrew their objections approximately seven weeks before the scheduled 4 evidentiary hearing and less than three weeks after the initial hearing before Judge Boyle. 5 Although this withdrawal could have occurred sooner, it occurred sufficiently prior to the 6 scheduled hearing to suggest that the original delay was not due to bad faith or an effort to 7 unreasonably and vexatiously multiply the proceedings. Accordingly, the Court declines 8 to award fees on this basis. 9 Finally, Plaintiff makes many allegations regarding bad faith by Cannon and 10 Cambridge Estates, including the allegations that “they hide from notice that Cambridge 11 Estates has assigned monies to Cannon that they both do not notify courts of” (Doc. 62 at 12 8) and that, “[i]n separate proceedings, undersigned counsel was able to obtain the fee 13 agreement” between Cannon and Cambridge Estates, which allegedly demonstrates that 14 Cambridge Estates assigns Cannon awards of attorneys’ fees and authorizes Cannon to 15 “convert to themselves homeowners payments.” (Doc. 62 at 9). The only issue presently 16 before the Court, however, is whether an award of attorneys’ fees is appropriate based upon 17 Cannon and Cambridge Estates’s objection to the garnishment. Because there was reason 18 to object to the garnishment, the allegations of wide-ranging bad faith across multiple legal 19 actions do not impact the Court’s analysis regarding the award of attorneys’ fees for 20 objecting to the garnishment. Although this Court is gravely troubled by Cannon’s 21 apparent failure to fully satisfy the 2017 judgment in this matter, that failure is also not at 22 issue in this fee application and accordingly cannot be used to justify a fee award for this 23 garnishment, particularly considering the limited circumstances under which Arizona law 24 authorizes such an award. 25 … 26 … 27 … 28 … 1 II. Conclusion 2 Based on the foregoing, 3 IT IS ORDERED that Plaintiff's Motion for Award of Attorneys’ Fees and Costs 4|| for the Garnishment Proceeding (Doc. 59) is denied. 5 Dated this 27th day of March, 2020. [6] 7 ( . Do we 8 norable'Diang/. Hurfetewa 9 United States District Fudge [28] -9-